A bizarre corporate battle has broken out in full public view between IndusInd Bank and Spanda Spoorthy controlled by Kedara Capital.
IndusInd Bank today issued a strongly worded clarification to the National Stock Exchange (NSE) regarding the employment of two key officials. The rebuttal came after Spandana Sphoorty Financial Limited (SSFL) announced the appointment of Shalabh Saxena as managing director (MD) & chief executive officer (CEO) and Ashish Damani as chief financial officer (CFO) of SSFL.
Both, Mr Saxena and Mr Damani, IndusInd Bank stated, are currently employed with the lender’s wholly-owned subsidiary, Bharat Financial Inclusion Limited (BFIL), and have not put in their papers. According to the company guidelines, any employee who is currently working with BFIL cannot accept a position at a rival company, such as SSFL. The Bank, through BFIL, provides micro-loans to women in rural India for income-generating activities under the joint liability group.
IndusInd Bank said the announcement about hiring a CEO wasn't correct because Shalabh Saxena hasn't yet resigned from Bharat Financial Inclusion.
As per an exchange filing by IndusInd Bank, Shalabh Saxena and Ashish Damani are currently employed with the Bank’s wholly-owned subsidiary, BFIL. While Mr Saxena is serving as the MD and CEO, Mr Damani is employed as the executive director and chief financial officer.
“Neither, Mr. Shalabh Saxena nor Mr. Ashish Damani have tendered their resignation from the services of BFIL.” the statement by IndusInd Bank says.
“As per the terms of their employment, once the resignation is tendered, it is subject to acceptance by the Board of Directors of BFIL (Board). Upon acceptance by the Board, a specified notice period is also required to be served. However, as neither of them have tendered their resignations to BFIL, such due process has not been initiated,” the statement added.
IndusInd Bank also said that it cannot relieve Mr Saxena and Mr Damani from their roles at Bharat Financial Inclusion until an ongoing review of microfinance business at the Bank is completed.
“Certain transactions relating to BFIL are subject matter of an ongoing review and the continued employment of Mr Shalabh Saxena and Mr. Ashish Damani at BFIL is critical to the closure of such process,” IndusInd said. “Accordingly, they cannot be relieved from the services of BFIL, until completion of the
Additionally, Mr Saxena and Mr Damani, as per their contractual terms of employment, are prohibited from accepting any role at a rival company, which also includes SSFL. Since no resignation has been submitted, Mr Saxena and Mr Damani’s purported acceptance of employment would be in contravention of their terms of employment with BFIL.
“In light of the above, BFIL and the Bank are in the process of evaluating and undertaking appropriate steps and actions, including strengthening the management of BFIL to continue its usual business operations under the able guidance of its management and the Bank,” IndusInd Bank stated.
On Monday, SSFL had said that Mr Saxena and Mr Damani accepted the positions offered by them. Mr Saxena was named the MD & CEO of Spandana Sphoorty after the exit of founder Padmaja G Reddy earlier this month. The statement also mentioned that both Mr Saxena and Mr Damani are currently serving at BFIL. “Both Mr Saxena and Mr Damani will join Spandana soon,” it had said.
What is even more interesting is that the developments unravel even as IndusInd Bank has been busy facing serious whistle-blower allegations about evergreening of loans, inflated revenues and under reporting of NPAs by BFIL.The Hinduja-owned Bank had earlier denied all allegations and said "all the loan products managed by BFIL in the capacity of a Business Correspondent, are approved by the bank and are fully compliant with extant regulatory guidelines."
IndusInd Bank had earlier issued another clarification that, due to a technical glitch in May 2021, nearly 84,000 loans were disbursed without the customer's consent getting recorded at the time of loan disbursement.
"This issue was highlighted by the field staff within two days and the technical glitch was rectified expeditiously. Out of the above, only 26,073 clients were active with the loan outstanding at Rs 34 crore, which is 0.12 per cent of the September-end portfolio," said the Bank.
SSFL was also in focus recently when two key high-ranking executives quit the company- Satish Kottakota resigned as the CFO while Abdul Feroz Khan resigned as the chief strategy officer.